Obama Administration Unveils Corinthian Debt Relief Plan

The now-defunct for-profit chain closed the last of its campuses this spring after being charged a $30 million fine by the department and being accused by a federal consumer watchdog agency of engaging in predatory lending and illegal collection tactics. Following Corinthian's closure, dispossessed students argued that their federal loans should be discharged, and advocacy groups and some lawmakers took up the cause, reported The Chronicle of Higher Education.

The Obama administration's plan would forgive the debt of all students who attended one of Corinthian's shuttered campuses after June 20, 2014 – the day the company agreed to transfer ownership of the properties. Other Corinthian students will be eligible for loan forgiveness but to receive it, they must demonstrate that Corinthian violated state law. The department said in its announcement that it would treat such cases on a group basis, not an individual one, "wherever possible."

Officials said they will hire a consultant to provide advice not only on how to judge the existing 1,400 debt relief claims they have received in recent months, but also to "develop a broader system that will support students at other institutions who believe they have a defense to repayment," as the process of loan forgiveness is known. The department also called on Congress to bolster its oversight of institutions and strengthen consumer protections for students.

All told, 15,000 students with $200 million in debt stand to benefit, the Chronicle reported. In addition, the department will guarantee forgiveness to students who enrolled from 2010 to 2015 in programs at the Corinthian-owned Heald College, which misrepresented their job placement rates. That covers 40,000 more borrowers with about $544 million in federal loans, according to the department.

Initial responses to the department's plan were mixed, with congressional Democrats and some student groups praising the agency's approach, and other lawmakers and advocates saying it fell short.